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$4.99 and the Pipeline Pricing Problem

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I am publishing a collection of short stories as an e-book. Concluding a series of posts on that subject, I’m setting a price for that content today, subject to further modifications, complications, frustrations and disturbances in the time-space pricing continuum, as prophesied below.

$4.99. That will be the price of my short story collection on Smashwords*, where I’ll be making the work available as an e-book. To the extent that I have now answered this vexing question, I am relieved. To the extent that I have unwittingly uncovered a new and nightmarish parallel problem, I wish I had been born with no curiosity and wealthy parents.

Why $4.99? Well, I can’t point to any single determining factor. Rather, I took everything I learned over the past few weeks (and months) and tried to find a price that met the evolving criteria without contravening my basic assumptions, which included:

Particularly helpful was data from Smashwords CEO Mark Coker, which pegged pricing sweet spots at the $5 and $9 price points. Following the maxim that a lower price is better when profit is the same, I chose the $5 price point over the $9 price point because I thought it would spur demand, and because I thought $9 for an e-book was simply too close to the low end of current print-book and print-on-demand (POD) pricing.  [ Read more ]

Price, Relativity and Quantum Mechanics

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I am publishing a collection of short stories as an e-book. Continuing a series of posts on that subject, I’m trying to work through the relevant pricing issues and set a price for that content.

Months ago, when I began idly wondering what my short story collection should sell for, I repeatedly found myself thinking in relative terms. In hindsight that approach seems to make sense given the rampant uncertainty in the e-book market , but it was more coincidence than prescience. I didn’t know how much I didn’t know, and I certainly didn’t know how much the industry didn’t know.

The comparison that popped up the most was what I took to calling hamburger pricing. Invariably this analogy would present itself while I was driving, because it’s impossible to travel anywhere in the United States for more than fourteen minutes without passing a hamburger stand. (I made that statistic up, but please feel free to quote me. The world can always use more urban myths.)

What I kept thinking at the time was that whatever my short story collection was worth, it had to at least be worth the average cost of an average hamburger at an average drive-up window. Without doing any research I pegged that number around $4, and in a lot of ways I felt like the idea made sense.

Which of course it doesn’t.  [ Read more ]

Quality, Fairness and Promise as Price

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I am publishing a collection of short stories as an e-book. Continuing a series from last week, I’m trying to work through the relevant pricing issues and set a price for that content.

Coming up on the end of a second week of thinking about how to price an e-book, I feel as if I finally understand the problem. I don’t have a final number yet for my short story collection, but I genuinely feel as if I have the tools to make that decision. (I know this kind of analytical obsessing isn’t as fun to read as gossip or flippant analysis, but if you’ve been reading along I hope you’ve gained some insight into these issues as well.)

Today and tomorrow I’m going to run down two perspectives I haven’t yet talked about. After that I’ll wrestle with the fact that setting a price in one place has an inevitable domino-effect along the pricing pipeline, and why I think that’s an indicator of problems to come. After that, I’ll pick my number and get back to the (relative) sanity of regular posting.

Fairness
Despite everything I’ve learned about the haphazard nature of pricing in general, and of e-book pricing in particular, I still retain a belief that there is some sort of fair value that can be applied to digital content. I know rationally that the marketplace will eventually come to define fairness as any stabilized price, but absent that stability I still find myself asking: what’s fair?

In the hard-bitten world of business this is obviously a naive view. What’s fair to most people is whatever they can get away with. If selling people into a mortgage or cell phone plan means using legalese to obscure relevant costs and fees, you do not hesitate to screw your customer. (To paraphrase Raymond Chandler, nobody ever made a hundred million dollars being a nice person — and that includes the messianic Mr. Jobs.)

Complicating things further, fairness is always a relative concept. Trying to be fair means trying to balance all factors involved, yet there’s no way to control for or even anticipate all of the variables. If I say a price is fair, who am I being fair to? A kid in Haiti who just lost his whole family? The rich, degenerate housewives on Bravo that are laughing all the way to your bank? Being fair in an absolute sense in any transaction seems a theoretical impossibility. In practice we rely on orderly (and regulated) markets to quantify fairness as a floating point between supply and demand, and that’s probably the best we can hope to do.  [ Read more ]

Consumer Expectations and Price

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I am publishing a collection of short stories as an e-book. Continuing a series from last week, I’m trying to work through the relevant pricing issues and set a price for that content.

We all have expectations. Sometimes, particularly when we’re young or old, our expectations can be out of step with reality. When we’re young we don’t have the cognitive ability to understand the world as it is, so we fantasize. When we’re old we may have trouble keeping up with the pace of change, and the world may move on without us.

Perhaps no other aspect of daily life in America defines our expectations more than the price of goods. We are a consumer society, and as such we gauge our worth and meaning by what we have and what we can afford. Goods that are priced out of reach make us feel poor. Goods that are within reach make us feel wealthy — or at least as if we have options.

Everyone has heard a child request a new car or new house in the same way that they ask for a piece of candy or scoop of ice cream. To a child price is no object because money has no meaning. And who hasn’t heard an elderly person comment that a candy bar used to be nickel or a gallon of milk a dime? To an elderly person prices may mark the zenith of their life experience, while also serving as a reminder of the threat posed by inflation and rising prices.

People in the prime of their working lives generally have more realistic expectations about prices, but they can still experience dissonance when the cost of goods change. Gas at $4.00 a gallon is an outrage. Gas falling back to $2.50 is a windfall. But note: these emotions and responses are usually relative, not based on an actual understanding of the costs of production. Because we live lives abstracted from our own survival needs, and because our economic lives are abstracted through bank accounts, direct-deposit paychecks and credit cards, there is often no contextual reality to the prices we pay. We pay what we pay because that’s what an item costs, not because we know that’s what an item is worth.  [ Read more ]

Louie DePalma Pricing

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I am publishing a collection of short stories as an e-book. Continuing a series from last week, I’m trying to work through the relevant pricing issues and set a price for that content.

Think about any subject long enough and you’re bound to end up in the weeds…

The title of this post refers to a deservedly famous Taxi episode in which Jim burns Louie’s apartment to a cinder, presenting Louie with the opportunity to quantify the practical limits of greed.

The problem with this approach in my case is that the DePalma price for an e-book is probably one dollar over the high end of the acceptable range — meaning something like eleven or twelve dollars. And I would only be able to get that price if the customer borrowed my car and wrapped it around a tree prior to making a purchase.

As much as I would like to embrace my inner greed, I just don’t see a useful lever. To my chagrin, market forces seem determined to have their way with me.

— Mark Barrett

Price, Profit and Market Size

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I am publishing a collection of short stories as an e-book. Continuing a series from last week, I’m trying to work through the relevant pricing issues and set a price for that content.

Assume for the moment you know beyond a shadow of a doubt that at least one person will buy your book no matter what the price is. What price would you set?

Obviously, $AllTheMoneyInTheWorld.

Unfortunately, history suggests a shifting relationship between price and demand (sales), meaning you may not always be able to employ this pricing strategy. As a fallback, it can help to imagine how the relationship between price and sales might play out for your product, given multiple variables. Unfortunately, doing so usually involves a great deal of market research, lots of wild guessing, and facility with a spreadsheet that I don’t have.

One thing I can say about the relationship between the price of my short story collection and sales of my short story collection is that my ability to maximize profit is not a pressing concern. To whatever extent I might be able to squeeze a few more dollars out of the market by endlessly worrying about price, I’m confident the variance between that maximum profit and the average profit is going to be fairly small, simply because the total number of people interested in the product will be small.

Thus liberated by my own limited appeal, it still seems valid to assume that setting a lower price will move more copies, while pricing the content at higher levels will decrease the number of people who buy the e-book. This is obviously why people advocate for the free/freemium pricing model: it promises that the price of your product will not negatively affect demand.  [ Read more ]

Price Ranges

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I am publishing a collection of short stories as an e-book. In this week’s blog posts I’m trying to work through the relevant pricing issues and set a price for that content.

More than once in my life I’ve had someone tell me they would like to own ItemX. When I asked how much ItemX cost, however, the person replied with, “I don’t know.”

Now, it’s not very often in our commercially saturated lives that we encounter a product which is outside our pricing experience. And that’s particularly true if we know enough about the product to know we want it. Which is why, when this scenario unfolds before me, I invariably respond like this: “Is it a dollar? A million dollars? Ten dollars? A hundred dollars? Ten hundred millions dollars?” And on and on, until the person calmly replies that one of those numbers is close to the mark.  [ Read more ]

Suspension of Disbelief Revisited

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Earlier today the following quote appeared on Twitter (via Guy Charles and others), regarding Jane Friedman’s keynote interview at PBV:

Friedman on enhanced ebooks: “Vook is read and watch… I’m not interested in disrupting the reading experience; it’s sacrosanct.”

By coincidence, I ran across the following quote at almost the same moment while doing research for the previous post:

There are plenty of people who cringe at the cultural toll, who believe that the loss of books means losing the tactile, absorbing relationship with text we’ve enjoyed for centuries. MIT technology guru Nicholas Negroponte would like to remind them that people resisted indoor plumbing, too.

“They complained that if women didn’t do the laundry beside the river and at the fountain they would be alone, but other things started to serve those social purposes,’’ said Negroponte, founder of the One Laptop Per Child program, a festival panelist, and Deborah Porter’s significant other. “The reading experience is becoming more social. There are various ways of interacting on e-readers or computers, where people blog and use Twitter, and where the sharp line between the writer and the reader is going away.’’

I understand both of these perspectives, but relative to the functional merits of books they are both wrong, and both wrong for the same reason.  [ Read more ]

Publishing: The New Math

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Here’s a quote from a piece on e-publishing, titled (provocatively) Why Ebooks Must Fail:

And therein lies the dilemma… how does the publishing industry fund the creation, editing, design, production, marketing, e-warehousing, and sales of ebooks, if the income isn’t there? How do ebooks cover the huge advances needed to buy books if we cannot generate the cash, especially at their extremely low, discounted prices, cover the advances that an entire industry has come to require? The answer is that ebooks, alone, cannot.

Given the assumptions, I can’t really disagree. But the assumptions aren’t a given.  [ Read more ]